A company is considering a project with annual after-tax cash flows of $5,600.00 per year for six years.The company's cost of capital is 14 percent.Present and future value factors for a 14 percent interest rate for six years are as follows: $\begin{array}{ll}
\text { Future value of } \$ 1 & 2.195 \
\text { Present value of } \$ 1 & 0.456 \
\text { Future value of a series of equal payments } & 8.536 \
\text { Present value of a series of equal payments } & 3.889
\end{array}$
Using the net present value method,what is the maximum amount that the company should invest?

Question

A company is considering a project with annual after-tax cash flows of $5,600.00 per year for six years.The company's cost of capital is 14 percent.Present and future value factors for a 14 percent interest rate for six years are as follows: $\begin{array}{ll}
\text { Future value of } \$ 1 & 2.195 \
\text { Present value of } \$ 1 & 0.456 \
\text { Future value of a series of equal payments } & 8.536 \
\text { Present value of a series of equal payments } & 3.889
\end{array}$ 
Using the net present value method,what is the maximum amount that the company should invest?

Quizplus · Accepted Answer

The maximum amount to invest is the present value of the cash flows: $5,600 * 3.889 = $21,778.40.

A Company Is Considering a Project with Annual After-Tax Cash